When settling a personal injury case with a workers’ compensation component, counsel representing the plaintiff’s third-party claim should understand the interplay between (i) Section 319 of the Pennsylvania Workers’ Compensation Act (“the Act”), (ii) the Pennsylvania Supreme Court’s decision in Whitmoyer v. Workers’ Compensation Appeal Board (Mountain Country Meats), 186 A.3d 957 (Pa. 2018), and (iii) the boilerplate “Third Party Settlement Agreement” form (Form LIBC-380) available for parties to download from the Pennsylvania Department of Labor & Industry Bureau of Workers’ Compensation’s website (the “Third Party Settlement Form”).
(The latter is an agreement between an injured worker, their employer, and/or the employer’s workers’ compensation insurance carrier to distribute the proceeds the worker received from a third-party claim.)
Those personal injury attorneys representing injured workers in their third-party claims who do not understand this interplay and blindly rely on the Third Party Settlement Form risk potentially committing legal malpractice. The best way for them to mitigate this risk is to coordinate their efforts to resolve their clients’ third-party claims with their clients’ workers’ compensation counsel.
Section 319, Whitmoyer, and workers’ compensation insurer liens
Section 319 of the Act is founded on the foundational common law premise that an injured party cannot be compensated twice for the same injury. Under section 319, where a third party caused a worker’s injury, the worker’s employer (or their insurance carrier) is “subrogated to the right of the employe,” and is thus entitled to reimbursement for certain expenses.
The Pennsylvania Supreme Court’s decision in Whitmoyer clarified the scope of the reimbursement. At issue was the meaning of the term “instalments of compensation” in section 319 as it appears below, and whether that term encompassed payment of both medical expenses and disability benefits:
“Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employe, his personal representative, his estate or his dependents, and shall be treated as an advance payment by the employer on account of any future instalments of compensation.”
In Whitmoyer, the claimant suffered work-related injuries, resulting in the amputation of part of his arm. His employer or its insurance carrier paid all of his medical expenses related to the injury and paid a lump sum for his disability benefits. Six years later, the claimant received a $300,000 third-party settlement related to his injuries. After this settlement, the claimant’s position was that he had an obligation to repay to his employer the amount of disability benefits he received from it in connection with his injury, but not the amount of the medical expenses it paid because section 319’s “future instalments of compensation” did not encompass future medical expenses because they are not paid as installments like disability benefits are.
A Workers’ Compensation Judge, the Workers’ Compensation Appeal Board, and a divided Commonwealth Court (sitting en banc) all ruled against the claimant, holding that his medical expenses were subject to a lien on account of the third-party settlement he secured.
In Whitmoyer, the Pennsylvania Supreme Court, however, saw things differently. It held that section 319’s inclusion of “instalments of compensation” regards payment of disability benefits only because medical expenses cannot be paid in installments, as they are not paid at periodic intervals—such as weekly or bi-weekly—like employee wages and disability benefits are. The court further noted that if it concluded “instalments of compensation” to have the same meaning as “compensation,” it would render “instalments of” meaningless, which would conflict with its rules of statutory construction.
Thus, Whitmoyer stands for the proposition that after an injured worker resolves a third-party claim regarding their injuries, their recovery is subject to a lien from their employer or its workers’ compensation insurer concerning already-paid disability benefits, but not their medical expenses. An employer or their insurer will be on the hook for an injured worker’s past and future medical expenses when the injured worker resolves a third-party claim regarding their injuries.
The Third Party Settlement Form does not explicitly reflect Whitmoyer’s holding
The Third Party Settlement Form available for parties to download was last revised in May 2022, according to the version of the document that is online at the time I am writing this article. Despite that revision coming almost four years after Whitmoyer was decided (in June 2018), the form does not reflect Whitmoyer explicitly enough to help attorneys avoid making a mistake when using the form that could reduce the amount of their clients’ workers’ compensation medical expenses that are paid for by an employer or its insurer—and that could open themselves up to a malpractice claim.
On one hand, the language in Paragraph 9 of the form was changed from an older version that stated:
“The employer/insurer is responsible for percent (#8) of any future weekly benefits and medical expenses to satisfy its obligation . . .”
to
“The employer/insurer is responsible for percent (#8) of any future weekly benefits to satisfy its obligation . . . .”
While the removal of “and medical expenses” is helpful, the current version of the form still has an area at the top of its worksheet section that asks for the “medical benefits” portion of the “[a]ccrued workers’ compensation lien.” But in the wake of Whitmoyer, there can be no workers’ compensation lien for medical benefits/expenses.
Because this portion of the form is more prominent than Paragraph 9 containing the change I mentioned, attorneys unfamiliar with Section 319 and Whitmoyer could calculate a dollar amount their client is entitled to after they resolve their third-party claim that could be less than they are entitled to in the wake of Whitmoyer.
In addition, some attorneys may use an older version of the Third Party Settlement Form that does not have the change to Paragraph 9 I described above. If they used this version, they could make a similar calculation error.
Communication is the key to avoiding the Third Party Settlement Form pitfall
I am writing this article because I was recently on the receiving end of an erroneous Third Party Settlement Form. An attorney representing an injured worker in their third-party claim filled out the form, including the amounts of disability benefits and medical benefits their client had received, and had their client sign it. Had the attorney fully executed the agreement by receiving signatures from the employer and/or its insurer, they might have been flirting with a malpractice claim because the form suggested there was a lien on the medical expenses the client received payment for.
Luckily for personal injury attorneys representing injured workers in third-party claims, there are several ways to avoid this Third Party Settlement Form pitfall.
Primarily, they should coordinate their calculation and resolution of any liens with their client’s workers’ compensation attorney. Ongoing dialogue between counsel here can avoid this pitfall, as workers’ compensation attorneys should be familiar with Whitmoyer’s impact on Section 319. In addition, counsel can discuss how their individual efforts could negatively affect the client’s overall recovery, and whether a change in strategy is required to avoid one claim’s resolution from negatively affecting the potential for, or amount of, the other’s resolution. These conversations can also help build rapport between counsel, which could lead to referrals between them down the road.
For personal injury attorneys going it alone, they could avoid using the Third Party Settlement Form and instead do the required calculations on their own, perhaps with the assistance of a workers’ compensation attorney they can bring on to the case for just this purpose. They could use the current version of the Third Party Settlement Form, but not include any “medical benefits” amounts in the worksheet section. And, if they’re using an older version of the form that does not include the change to Paragraph 9 I described above, they can strike through “medical expenses” in that paragraph and, again, avoid including any “medical benefits” amounts in the worksheet section.
Upholding the “grand bargain”
The workers’ compensation system in Pennsylvania and across the U.S. is based on the “grand bargain”—employers will provide workers injured on the job payments for lost wages and medical expenses in exchange for those workers not bringing civil claims against them regarding their injuries. When injured workers prevail in third-party claims, their attorneys representing them in those claims must protect what their clients sacrificed when agreeing to the grand bargain by correctly calculating the size of their clients’ employers’ liens and not allowing those employers to recoup one cent more than they are entitled to under Pennsylvania law.
Jerry M. Lehocky is a founding partner of Pond Lehocky Giordano LLP, the largest workers’ compensation and Social Security disability law firm in Pennsylvania, and one of the largest in the United States. He can be contacted at jlehocky@pondlehocky.com.
Reprinted with permission from the March 19, 2024 edition of The Legal Intelligencer © 2024 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.
